tescoA group of 124 institutional investors have joined a claim filed in London’s high court on October 31, 2016 against Tesco seeking damages for the company’s alleged financial misrepresentations. The claim, which seeks over £100 million in alleged damages, was filed on the investors’ behalf by the Stewarts law firm, and is supported by Bentham Europe Limited, an affiliate of Australian group IMF Bentham, a funding litigation firm whose shares are publicly traded on the ASX. A copy of Bentham Europe’s October 31, 2016 press release can be found here. An October 31, 2016 article in The Guardian about the lawsuit can be found here.


When Tesco announced in October 2014 that it had previously overstated its profits, a securities class action lawsuit in the U.S. soon followed. However, under the holding of the U.S. Supreme Court’s 2010 holding in Morrison v. NAB, Tesco shareholders who had purchased their shares on the London Stock Exchange were closed out from the U.S. class action. (The U.S. class action, who had purchased Tesco American Depositary Receipts in the U.S., later settled for $12 million, as discussed here.) In order to represent the claims of the investors who purchased their shares on the LSE, in November 2014, the Stewart law firm and IMF Bentham solicited investors to join an action they proposed to file in the U.K. on the investors behalf, as discussed here.


As discussed in Bentham Europe’s October 31 press release, the investors’ claims long-anticipated claims have now been filed with the court. The claims assert that the company violated the Financial Services & Markets Act. An overview of the claims asserted can be found in a summary on the Bentham website, here.


The Stewarts law firm, which filed the action on the investors’ behalf, is also involved in the U.K. law firm filed on behalf of RBS investors that were closed out of the U.S. securities class action lawsuit, as discussed here. Clearly, at least one law firm is committed to exploring the existing U.K. law and attempting to establish that the law supports the rights of aggrieved investors to seek to recover damages for investment losses based on alleged misrepresentations.


The new U.K. action against Tesco is just the latest example of the phenomenon I described in a recent blog post, the global rise of collective investor litigation. The new Tesco action is also an illustration of a further point in that regard, which is the critical role that third-party litigation funding is playing in driving the increasing level of collective investor litigation. For example, as I noted here, Bentham Europe is also involved in one of the efforts to pursue securities litigation against VW. Litigation funding has also played an indispensable role in the growth of securities class action litigation in Canada and Australia. The availability of litigation funding is, at a minimum, helping to facilitate the rise of collective investor actions.


These developments clearly should concern corporate managers around the world. D&O insurers also will want to carefully note these developments as well, as they could have significant implications for present and future litigation frequency – and, arguably, severity as well, as investors seek to maximize their returns on litigation investments.